3 min read.Updated: 29 Jun 2020, 05:36 AM ISTRhik Kundu
We are taking deliveries of all our new NEO aircraft and balancing these by returning all the CEO aircraft, he said
Dutta said Indigo is looking to raise finance against its various unencumbered assets for additional liquidity
NEW DELHI: India's largest domestic airline IndiGo is keeping a tight control over its costs to tide through the current pandemic. It may take anywhere between 18 and 24 months to recover from the current situation to come back to the pre-covid levels of travel demand, Ronojoy Dutta, the airline's chief executive, told Mint in an email interview. He added that a recovery depended upon how other countries resume their international operations. Here are the edited excerpts of the interview.
Due to the pandemic, leisure flying has taken a back seat. Is safety the biggest factor that is keeping people away from flying?
We can all agree to the fact that due to the pandemic situation in the country, business and leisure travel may take a backseat for some time until the virus subsides to a greater extent. However, the risk of transmission of covid-19 from one passenger to another passenger on board is very low, making flying the safest way to travel. The reasons for this are that the customers sit facing forward and not toward each other, seat backs provide a barrier, the use of HEPA filters and the direction of the air flow on board (from ceiling to floor), and the limited movement onboard aircraft once seated add to the onboard protection. Furthermore, as a responsible airline, we have also taken various steps to ensure that our passengers and crew members are safe while onboard.
Can you elaborate on the various cost measures initiated by the airline to tide through the pandemic?
Amidst the crisis situation, we strive to manage not for profitability or growth but for liquidity. Our focus is on managing our cash balance by reducing costs, maintaining liquidity, exploring alternate sources of revenue and building consumer and employee confidence through a safe and hassle-free flying experience.
We have undertaken measures like negotiating better prices and terms with our partners, staggered pay cuts, placing our discretionary expenses on hold and deferment of certain capital expenditure projects to reduce costs. Additionally, we are replacing our old A-320CEOs with new A-320NEOs to enhance cost efficiency, freezing supplementary rentals. We are in talks with suppliers to provide more favourable credit terms and we are not paying out dividends this year to ensure liquidity.
We are also looking to raise finance against the various unencumbered assets of IndiGo which could be a source of additional liquidity for us. We expect these measures to help us generate additional liquidity of approximately INR 30-40 billion.
IndiGo continues to take delivery of new aircraft even when the load factor is at a historic low due to covid-19. Why?
We value the efficiency and structural low costs associated with our new NEO aircraft (Airbus A320 and A321 aircraft) , and thus we will continue to substitute them for the older CEO aircraft as fast as we can. We are therefore taking deliveries of all our new NEO aircraft and balancing these fleet additions by returning all the CEO aircraft that we had committed to earlier.
Any form of guidance in terms of revenue, profitability?
We reported ancillary revenue growth of 30% against a capacity growth of 4% compared to the same period last year (Q4, FY21 VERSUS Q4, FY 20). Our CarGo line of business has performed extremely well until the lockdown. Given the need to preserve cash, we are not looking to pay any dividend this year. Along with this, we have taken and will continue to take, a number of actions to shore up our liquidity. We would need to be at an 85% operational capacity to break even and we hope to achieve that by June 2021.
Can you share an outlook on international travel and IndiGo's plans?
We are already operating several international charter services each day, either as part of the Vande Bharat programme, or for individual entities and corporations. However, we are expecting the government to resume international operations soon in a phased manner by following all the precautionary measures and guidelines.
We are hopeful that the government will open international skies July onwards. We will start with the nearest short haul markets that have a sustainable travel demand like the Middle-East. International traffic will be an important aspect in the revival of the aviation sector and contribute to overall economic recovery.
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